December 4, 2020
Earlier today, the CFPB filed an action in federal court against LendUp, an online lender that provides single-payment and installment loans to consumers in many states. LendUp has been sued by the CFPB before and paid a civil penalty in settlement of the charges in that action.
This time, the CFPB alleges that LendUp violated the MLA and DoD’s MLA regulation in connection with 1,200 consumer borrowers in 4,000 separate transactions since October 3, 2016. The charges include:
1. Imposing more than the maximum 36% Annual Percentage Rate, which if proven is a violation of the Act and Regulation and would cause all of these transactions to be void from the outset;
2. Including in loan agreements provisions requiring borrowers to submit to arbitration, which if proven is a violation of the Act and Regulation; and
3. Failing to disclose the Military Annual Percentage Rate to its borrowers.
The CFPB seeks a permanent injunction against violations by LendUp, rescind the consumer-credit agreements that violated the Act and Regulation, impose a civil penalty against LendUp, and award against LendUp the CFPB’s costs, among other requests for relief. Assessment of the CFPB’s costs could be a new enforcement tool and it has significant consequences for any provider of consumer credit products covered by the MLA and DoD Regulation.
The CFPB’s action was filed in the United States District Court for the Northern District of California where LendUp is located. The complaint was signed by one of the CFPB enforcement attorneys who was involved with the TILA actions against pawnbrokers in Virginia in 2016.
In the press release announcing the filing the CFPB stated:
“Today’s action is part of a broader Bureau sweep of investigations of multiple lenders that may be violating the MLA. The MLA puts in place protections in connection with extensions of consumer credit for active-duty service members and their dependents, who are defined as “covered borrowers.” These protections include a maximum allowable annual percentage rate of 36%, known as a Military Annual Percentage Rate (MAPR), a prohibition against required arbitration, and certain mandatory loan disclosures.”
The CFPB press release is available at https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-sues-lendup-loans-llc-allegedly-violating-military-lending-act/ which also provides a link to the complaint filed in federal district court in the Northern District Court of California.
Once again we recommend that you review your MLA compliance procedures and go over them with your employees.
This GRC Update is not intended and should not be construed as legal advice to NPA members.
Members should consult their own lawyers for legal advice. Copyright © National Pawnbrokers Association 2020. All rights reserved.